McGraw v. Jones

• Decision Date: 29 June 2006
• Docket Number: No. 06-00048.,06-00048.
• Parties: Dr. Lisa McGRAW, Appellant, v. Scott W. JONES and Lizabeth Jones, Husband and Wife, Appellees.
• Court: Arkansas Supreme Court

238 S.W.3d 15

Dr. Lisa McGRAW, Appellant, v. Scott W. JONES and Lizabeth Jones, Husband and Wife, Appellees.

No. 06-00048.

Supreme Court of Arkansas.

June 29, 2006.

Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., by: L. Kyle Heffley and Tamla J. Lewis, Rogers, AR, for appellant.

Law Offices of Charles Karr, P.A., by: Charles Karr, Fort Smith, AR, for appellees.

ANNABELLE CLINTON IMBER, Justice.

This case is an appeal from a default judgment in a medical-malpractice case. Appellant, Dr. Lisa McGraw, a doctor with Mercy Health Systems of Northwest Arkansas, was one of three named defendants in a medical-malpractice case filed by Appellees, Scott and Lizabeth Jones. Appellant was properly served with process on December 2, 2004. Upon receiving the complaint and summons, Appellant gave the documents to her office staff, who, in turn, placed them in interdepartmental mail to the in-house attorney, Heather Lipke. According to Ms. Lipke's affidavit, the documents never reached her. Appellant never filed an answer or other responsive pleading.

On March 22, 2005, Appellees filed a motion for default judgment against Appellant. On March 23, 2005, the circuit court entered a default judgment against Appellant and a dismissal without prejudice as to the remaining defendants. The court scheduled a hearing on April 18, 2005, for the purpose of determining the amount of damages sustained by Appellees. At that hearing, Appellees presented evidence on their actual damages totaling around $43,000 and past and future pain and suffering. The circuit court awarded $500,000 in damages. Thereafter, Appellant was served with a writ of garnishment on May 17, 2005, and on June 2, 2005, she filed a motion to set aside default judgment. The circuit court held a hearing and denied the motion, as well as Appellant's subsequent motion to clarify or amend its prior order, on October 3, 2005. Appellant then filed a notice of appeal on October 18, 2005. As the appeal involves the interpretation and constitutional challenge of Ark. R. Civ. P. 55, we have jurisdiction pursuant to Ark. R. Sup.Ct. 1-2(b)(6)(2005).

I. Excusable Neglect

Appellant first argues that the circuit court erred in failing to set aside the default judgment because Appellant's failure to file an answer was the result of excusable neglect under Ark R. Civ. P. 55(c) (2005). Ark. R. Civ. P. 55 provides in relevant part:

(a) When Entitled. When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules, judgment by default may be entered by the court.

(b) Manner of Entering Judgment. The party entitled to a judgment by default shall apply to the court therefor, but no judgment by default shall be entered against an infant or incompetent person. If the party against whom judgment by default is sought has appeared in the action, he (or if appearing by representative, his representative) shall be served with written notice of the application for judgment at least 3 days prior to the hearing on such application. If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings as it deems necessary and proper and may direct a trial by jury.

(c) Setting Aside Default Judgments. The court may, upon motion, set aside a default judgment previously entered for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) the judgment is void; (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; or (4) any other reason justifying relief from the operation of the judgment. The party seeking to have the judgment set aside must demonstrate a meritorious defense to the action; however, if the judgment is void, no other defense to the action need be shown.

Ark. R. Civ. P. 55(a)-(c) (2005). We have recognized that defaults are not favored in the law and that a default judgment may be a harsh and drastic result affecting the substantial rights of a party. CMS Jonesboro Rehab., Inc. v. Lamb, 306 Ark. 216, 812 S.W.2d 472 (1991). Notwithstanding, we have declined to set aside default judgments where the neglect or mistake is inexcusable. Volunteer Transp., Inc. v. House, 357 Ark. 95, 162 S.W.3d 456 (2004); Maple Leaf Canvas, Inc. v. Rogers, 311 Ark. 171, 842 S.W.2d 22 (1992). The standard by which we review the granting of a default judgment and the denial of a motion to set aside the default judgment is whether the circuit court abused its discretion. Volunteer Transp., Inc. v. House, supra.

In this case, Appellant offers as grounds for relief that she followed Mercy's policy in handling her complaint. Specifically, after receiving the summons and complaint, she turned the papers over to the senior office administrator "who assured her the matter would be taken care of." In turn, the administrator attempted to ensure that the lawsuit papers were forwarded to Mercy's in-house attorney, but for reasons unknown, the papers never reached the attorney. Appellant submits that her actions in relying on the assurances by the office staff, though neglectful, were not inexcusable neglect. As support for that proposition, she suggests that this case is similar to Hubbard v. Shores Group, Inc., 313 Ark. 498, 855 S.W.2d 924 (1993), where we affirmed the trial court's holding that the defendant's failure to answer the summons constituted excusable neglect. However, the facts in Hubbard are markedly different from those in the instant case.

In Hubbard, the plaintiff filed suit against Mid-Arkansas Tom's, The Shores Group, Inc., and 1st Service, Inc. Service of process on Mid-Arkansas Tom's was had by serving its president, Jerry Wardlaw. Wardlaw testified that five days before being served, he learned that his wife of twenty-seven years had breast cancer that would require surgery and extensive post-surgical treatment. Furthermore, on the day he was served, his bank called to inform him of an overdraft and he discovered that an employee had stolen $6,000 in deposits. Finally, he testified that the style of the complaint was "Harold Hubbard v. The Shores Group, Inc." and that he did not realize Mid-Arkansas Tom's was also included in the suit. Mid-Arkansas Tom's failed to answer the complaint, and a default judgment was entered against it. A month later, Mid-Arkansas Tom's filed a motion to set aside the default judgment, which the court granted. On appeal, we affirmed the circuit court's decision to set aside the default judgment, holding, "It is hard to imagine a more compelling set of facts than those of this case for a finding of excusable neglect." Id. at 502, 855 S.W.2d at 927. In the instant case, Appellant has demonstrated no extenuating circumstances rising to the level of the facts in Hubbard. Additionally, in Hubbard we reviewed the circuit court's finding of excusable neglect for an abuse of discretion; here we must review the circuit court's finding of inexcusable neglect for an abuse of discretion.

Moreover, we have held that failure to attend to business is not excusable neglect. Volunteer Transp., Inc. v. House, 357 Ark. 95, 162 S.W.3d 456 (2004); Maple Leaf Canvas, Inc. v. Rogers, 311 Ark. 171, 842 S.W.2d 22 (1992); CMS Jonesboro Rehab., Inc. v. Lamb, 306 Ark. 216, 812 S.W.2d 472 (1991). The facts in CMS Jonesboro Rehab., Inc. v. Lamb, where this court rejected the notion that relying on outside assurances that the lawsuit would be handled should constitute sufficient action to avoid a default judgment, are almost indistinguishable from the instant case. In CMS, the defendant CMS contacted its insurance carrier about defending an action on behalf of CMS. The insurance company initially agreed, but then reneged and advised CMS to contact the general contractor, which CMS did. Id. at 221, 812 S.W.2d at 475. The general contractor agreed to assume the defense, but no defense was ever mounted. Four and a half months after that, a default judgment was entered against CMS, and another four and a half months elapsed before CMS moved to set aside the judgment. Id. at 218, 812 S.W.2d at 473. In affirming the circuit court's finding that the actions did not constitute excusable neglect, we said:

CMS did nothing to assure that the general contractor was indeed defending it. And four and one-half months did pass from the date of filing the complaint to the date of entry of a default judgment during which time CMS apparently did not monitor the case. More was required of CMS than was shown in this case, and that formed the basis for the trial court's ruling.

Id. at 222, 812 S.W.2d at 476.

These same arguments apply to the instant case. Here, Appellant did nothing to ensure that a defense was being mounted on her behalf by Mercy's in-house attorney. Indeed, she did not even follow up to make sure that the attorney received the papers. Over three months passed between the date Appellant received the summons and complaint and the date the court entered the default judgment. Yet, during that period of time, she did nothing to inquire about the status of the suit. Just as in the case of CMS, more was required of Appellant than was shown, and her failures do not amount to excusable neglect. CMS Jonesboro Rehab., Inc. v. Lamb, supra; see also Sun Gas Liquids Co. v. Helena Nat'l Bank, 276 Ark. 173, 633 S.W.2d 38 (1982)(no excusable neglect where secretary of garnishee averred that she had mailed notice of garnishment to home office in Pennsylvania and was only told later that it never arrived).

Further, the fact that Appellant may have offered a meritorious defense to the underlying claim is not sufficient to support setting aside the default judgment. While it is true that defendants wishing to...